The Pound to Indian Rupee exchange rate has slipped throughout the week so far despite mixed demand for the Rupee, as Sterling was sold across on the board on the latest Brexit news. The pair began the week trading at around 86.2938 but fell on Monday. Its lows were extended on Tuesday as Rupee sentiment improved and GBP/INR hit a three-year-low of 84.7169.
Pound (GBP) Hits New Post-Referendum Lows on Fresh Brexit Jitters
While British markets had briefly taken a more optimistic tone on Britain’s Brexit vote in late-August due to better-than-expected economic data and speculation that Britain could retain access to the European Union’s single market after leaving, most of that confidence had faded by this week.
UK Prime Minister Theresa May confirmed over the weekend that the UK government intended to activate Article 50 and begin the formal Brexit process by the end of March 2017.
British officials have also been shying away from hinting at single-market access. May stated on Tuesday that Britain would instead aim for a new kind of deal with the EU, weighing heavily on hopes for post-Brexit single market access.
The week’s optimistic UK ecostats have done little to bolster GBP demand in the face of this market-wide Brexit panic. Markit’s September UK Manufacturing PMI jumped from 53.4 to 55.4, and Construction recorded its first growth score in months at 52.3.
Indian Rupee (INR) Confidence Improves as RBI Tightens Monetary Policy
The new Governor of the Reserve Bank of India (RBI), Urjit Patel, shocked markets on Tuesday when he unexpectedly cut India’s key interest rate from 6.50% to 6.25% in his first policy decision as Governor.
His predecessor, Raghuram Rajan, had become well-known for aggressively reeling in India’s out-of-control inflation. As such, Patel’s action to take advantage of softer inflation cheered markets.
All six members of the RBI’s new Monetary Policy Committee (MPC) voted in favour of the cut. The Indian Rupee soared in response to the news, with confidence in India’s economic prospects improving.
The Rupee had struggled to advance on Monday due to higher oil prices, but GBP/INR dropped regardless due to Sterling’s market-wide selloff.
GBP/INR Exchange Rate Forecast: Services PMIs Due Wednesday
The Indian Rupee could hold onto its current highs for the coming week as confidence grows in the new Reserve Bank of India (RBI) policy panel.
Wednesday will see the publication of September Services PMI figures for both Britain and India. Both figures are expected to have dropped, but if Britain’s beat expectations as Manufacturing and Construction did, Sterling could capitalise on this to recover slightly from Monday and Tuesday’s lows.
Oil prices have improved in the last week due to an oil output cap announcement from OPEC member nations. As India is an emerging market, it benefits from cheaper oil prices and as a result the Rupee could weaken if oil prices continue to improve.